A day before the GS news broke, we pointed out that the market is poised for a correction at least based on Fib. Sure enough, the ludicrous non-stop rally from the February lows topped at exactly a 61.8% extension of the previous sell-off (1211.6)). Was the Goldman news predicated by the SEC's religious following of Fibonacci signals? Is the 100% Fib retracement next (1144)?

The Fib retracement from the highs to the lows in the cycle is now nearly 61.8 (at 1,228). The retracement from the highs to the lows in the first wave of the Great Depression peaked just below 61.8.Does history repeat itself, or come in tidy little Fibonacci packages? Are today's math Ph.D.'s even aware of retracements, or do they just know how to buy, buy, buy on ever declining volume? 1,228 is the magical number on the S&P. We'll find out soon enough.

I'm not too good with numbers but how does 1211.6 = 1228? Maybe someone could help out this product of public schools.

NEW YORK--(Business Wire)--The Goldman Sachs Group, Inc. (NYSE: GS) said today: We are disappointed that the SEC would bring this action related to a singletransaction in the face of an extensive record which establishes that theaccusations are unfounded in law and fact. We want to emphasize the following four critical points which were missing fromthe SEC`s complaint.

* Goldman Sachs Lost Money On The Transaction. Goldman Sachs, itself, lost morethan $90 million. Our fee was $15 million.We were subject to losses and we didnot structure a portfolio that was designed to lose money. * Extensive Disclosure Was Provided. IKB, a large German Bank and sophisticatedCDO market participant and ACA Capital Management, the two investors, wereprovided extensive information about the underlying mortgage securities. Therisk associated with the securities was known to these investors, who were amongthe most sophisticated mortgage investors in the world. These investors alsounderstood that a synthetic CDO transaction necessarily included both a long andshort side. * ACA, the Largest Investor, Selected The Portfolio. The portfolio of mortgagebacked securities in this investment was selected by an independent andexperienced portfolio selection agent after a series of discussions, includingwith Paulson & Co., which were entirely typical of these types of transactions.ACA had the largest exposure to the transaction, investing $951 million. It hadan obligation and every incentive to select appropriate securities. * Goldman Sachs Never Represented to ACA That Paulson Was Going To Be A LongInvestor. The SEC`s complaint accuses the firm of fraud because it didn`tdisclose to one party of the transaction who was on the other side of thattransaction. As normal business practice, market makers do not disclose theidentities of a buyer to a seller and vice versa. Goldman Sachs neverrepresented to ACA that Paulson was going to be a long investor.

BackgroundIn 2006, Paulson & Co. indicated its interest in positioning itself for adecline in housing prices. The firm structured a synthetic CDO through whichPaulson benefitted from a decline in the value of the underlying securities.Those on the other side of the transaction, IKB and ACA Capital Management, theportfolio selection agent, would benefit from an increase in the value of thesecurities. ACA had a long established track record as a CDO manager, having 26separate transactions before the transaction. Goldman Sachs retained asignificant residual long risk position in the transaction IKB, ACA and Paulson all provided their input regarding the composition of theunderlying securities. ACA ultimately and independently approved the selectionof 90 Residential Mortgage Backed Securities, which it stood behind as theportfolio selection agent and the largest investor in the transaction. The offering documents for the transaction included every underlying mortgagesecurity. The offering documents for each of these RMBS in turn disclosed thevarious categories of information required by the SEC, including detailedinformation concerning the mortgages held by the trust that issued the RMBS. Any investor losses result from the overall negative performance of the entiresector, not because of which particular securities ended in the referenceportfolio or how they were selected. The transaction was not created as a way for Goldman Sachs to short the subprimemarket. To the contrary, Goldman Sachs`s substantial longposition in thetransaction lost money for the firm. The Goldman Sachs Group, Inc. is a leading global investment banking, securitiesand investment management firm that provides a wide range of financial servicesto a substantial and diversified client base that includes corporations,financial institutions, governments and high-net-worth individuals. Founded in1869, the firm is headquartered in New York and maintains offices in London,Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.

Cramer "Breaks" News About Goldman Being Long Abacus, No Disclosure On Goldman's Short Exposure In The Structured ProductCreamer has just come to the rescue of this former co-workers at Goldman, claiming a "source" has notified him that Goldman was "long" Abacus. Well, duh - that's how structured finance works. They are long one tranche and short another. Cramer should also immediately provide "factual" information to all those who may have bought Goldman on his BS, whether Goldman wasin fact net short via CDS with AIG... Yeah, remember that whole thing about Goldman being short CDOs via CDS underwritten by AIG? Apparently it slipped the mind of Cramer's source. This is yet another semantic loophole abused by the world's greatest wealth destroying stock pumper. And by the way, Jim, take a look at the CDOs that Goldman had protection on AIG with before you "break" any more news, and find out what Goldman's exposure really was: because our sources tell us Goldman was short. Also, this is not even remotely a "game changer" at all, because the SEC's contention has nothing do with whether Goldman was shorting the CDO, but how the CDO was designed in the first place, with the explicit purpose of benefiting one party whose material involvement was not disclosed, and in fact was misrepresented!

Goldman sold 1,000 big SP today over 1,200.00. Was it just a hedge because they KNEW the SEC would do nail them to the cross? Is that insider trading? Who knows how many tens of thousands they sold in the ES?

Mkt is up how many fkn % off the low? Today ops ex? what a bunch of horse shit.

We have a guest market recapper for this week! First a couple of observations:

S&P 500: The mini closed at 78 even today, breaking out of our two week range. Paper still very active scooping up contracts at discounted prices when they sell off. Bias is still long.

CL: GS upgraded entire energy sector on Monday, naturally that only works if CL catches a bid so paper also came through with a bid at about the same time. I posted on twitter that our short term bias had to change from bear to bull. Note: loooong term bias for CL has always been bullish for reasons outlined in previous vids. We have yet to beak the high from mid Oct 09, watch your price levels but no reason why we won't go higher. Cap and trade is still coming whether you like it or not.

EURUSD: Caught a bid like we thought. ZH is johnny on the spot with their posts trying to mock GS's markets calls. However, I think that the GS calls are deliberately incorrect... We're on the right side every time. There is no reason why they wouldn't be as well unless it's some type of PR campaign to demonstrate/generate sympathy, maybe. I prefer to think they did it to fuck with ZeroHedge. They clearly took the bait, as they would. They're not very smart. Paper came through again 3/31 and they were buyers, the same happened on 4/1. Today price declined, along with everything else that was open except for the S&P. I can't make a case to get or bullish or bearish until we see Monday. Today is simply too hard to interpret because of the lack of action.

Former Goldman Commodities Research Analyst Confirms LMBA OTCGold Market Is "Paper Gold" PonziTyler Durden's pictureSubmitted byTyler Durden on 03/28/2010 12:47 -0500When we put up a link to last week's CFTC hearing webcast little did we know that it would end up being the veritable (physical) gold mine (no pun intended) of information about what really transpires in the commodities market. First, we obtained direct evidence from Andrew Maguire (who may or may not have been the target of an attempt at "bodily harm" as reported yesterday) of extensive manipulation in the silver market. Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets (we are assuming for the time being that all allegations of the Fed manipulating the broader equity and credit markets are completely baseless). Using the testimony of a clueless Jeffrey Christian, formerly a staffer at the Commodities Research Group in the Goldman Sachs Investment Research Departmentand now head and founder of the CPM Group, Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."

Christian, who describes himself as "one of the world’s foremost authorities on the markets for precious metals" yet, in the words of Gary Gensler, said "that the bullion banks had large shorts to hedge themselves selling elsewhere- how do you short something to cover a sale, I didn’t quite follow that?" and proves that current and former Goldman bankers are some of the most arrogant people alive, assuming that everyone else is an idiot and will buy whatever explanation is presented just because the CV says Goldman Sachs.

Children, when bullion banks are selling, its because someone(s) in physical is BUYING which drives the price up. Remember how when demand increases so does price from high school econ? Therefore banks (market makers) are inherently long which is why the sell short the futures. All the shit they have in inventory is APPRECIATING IN VALUE bc physical supply is dropping while they sell it to the buyers who are bid price up as supply drops. To cover the inevitable drop in price from the increase in physical inventory when retail sells ,(adds supply which results in lower prices, and banks HAVE to buy it back at lower prices), they short the futures!

The former GS guy is not arrogant, nor is he clueless as you claim, nor is he asuming everyone is an idiot as you also claim. You're just completely fucking retarded, Tyler. In fact, here's how clueless you are. You actually posted what I just said above in the video (for the illiterate) that you posted. Not only did this baffle your mind 1x while watching the video, you couldn't grasp the concept of supply and demand while seeing it in print for a second time.

J. CHRISTIAN: well, actually let’s go back to a concrete example of Mr. Organ when he was talking about August of 2008 when there was an explosion in the short positions in gold and silver held by the bullion banks on the futures market and he seemed to imply that that was somehow driving the price down. If you understand how those bullion banks run their books the reason they had an explosion in their short positions was because they were selling bullion hand over fist in the forward market, in the physical market, and in the OTC options market. Everyone was buying gold everywhere in the world so the bullion banks who stand as market makers were selling or making commitments to sell them material and so they had to hedge themselves and they were using the futures market to do that. So if you place position limits on the futures market they will have to find some other mechanism to hedge themselves …and they will. And someone else will provide that market…

Eco 101 strikes again.

Oh But wait he mispoke!???! OH SHIT!

CHAIRMAN GENSLER: I would like to follow up on Commissioner Dunn’s question for Mr. Christian, if I might, because I didn’t quite follow your answer on the bullion banks. You said that the bullion banks had large shorts to hedge themselves selling elsewhere, and I didn’t understand; I might just not have followed it and you’re closer to the metals markets than me on this, but how do you short something to cover a sale, I didn’t quite follow that?

J. CHRISTIAN: Well, actually I misspoke.Basically what you were seeing in August of 2008 was the liquidation of leveraged precious metals positions from a number of places and the bullion banks were coming back to buy it, and they were hedging those positions by going short on the COMEX and that is really what it was.

[Even on a second attempt Mr. Christian invents the most ridiculous poppycock to explain away the blatant manipulation of the precious metals in 2008. If, in his own words, investors were buying gold hand over fist everywhere in the world why would leveraged long holders dump all their long holdings? They would have ordinarily been making a fortune. The bank participation report of August 2008 shows that 2 or 3 bullion banks sold short the equivalent of 25% of world annual silver production in 4 weeks and the equivalent of 10% of world annual gold production. There was simultaneously a decrease in their long positions, which were almost non-existent anyway, which is incoherent with a notion the bullion banks were mopping up dumped leveraged investments. For an intelligent and coherent explanation of what happened in August 2008 read my CFTC written testimony here]

So now we have banks (any bank doesnt matter), going long physical and once again selling short futures to hedge in the face of a number of places selling? OH THE HORROR!!!

Here's the best part:

If, in his own words, investors were buying gold hand over fist everywhere in the world why would leveraged long holders dump all their long holdings?

Discretionary Traders Number One EnemyandMany Traders Do Not Know About It.

"A trading system alone will not assure success without proper risk control, beginning with individual trades, extending to diversification of markets, and continuing until a portfolio of different trading strategies is created. Every trading style has losing streaks that will ruin an investor who begins trading at the wrong time without adequate capital; therefore the size of the position, the markets to trade, and when to increase or decrease leverage become important for financial survival." by Perry J. Kaufman

This image shows trading account drawdown percentages and what percentage gain is required to return your trading account back to the amount prior to the drawdown.

What percentage drawdown are you willing to have in your trading ?

Want smaller drawdowns ? - read on.

Learning risk control from a Coin Toss example

Simply because a coin only has two outcomes - heads or tails,everybody knows the odds of a coin toss is 50 / 50.

This next image shows the long lossing streaks that occurred in this ACTUAL coin toss sample

The next image is critical to understand trading risk, it shows the trading account drawdown percentage that results from lossing streaks using different percentage of account equity at risk per trade and the single critical element you must control is what percentage of account equity you risk on each trade you take. That is a most important aspect to your trading success.

Traders the important part to understand from this posting is every strategy WILL have lossing streaks that most likely will be bigger than you might think. If you risk too big of a percent of equity on each trade you make your guaranteed given enough time trading to hit the Risk of Ruin event (in other words -> your account being busted).

I would not presume to suggest what another trader should risk. I do suggest to trade from an informed stand point of the relationships between position sizing, account equity at risk per trade and drawdowns. What I am saying it this posting is pick the maximum drawdown percentage your willing to suffer. Look at your strategies consecutive lossing steaks increase that by a safety margin and then use the chart to pick the percentage account equity at risk that will keep you under the drawdown level YOU have chosen.

Number One Worst Enemy Of Traders

Uncontrolled Risk from making large equity risking trades. Trading is not swinging for the fence home run while racking up a long string of strike outs. Controlling risk is the only way to stay in the trading game for the long haul.

Critical Key to Successful & Long Term Profitable Trading

Taking a profit from a very large number of extremely small percentage of equity risking trades. Keeping you account equity at risk per trade in the range from 1/2% to max of 3% . This equity at risk percentage per trade is not talking about the margin/buying power used to get in the trade it is the amount at equity at risk before your trade position hit your stoploss. If you do not have a very clearly defined stoploss on every trade, then look out your headed toward experience a Risk of Ruin experience.

Bottomline1- Pick the maximum drawdown percentage your willing to suffer.2- Look at your strategies consecutive loses then increase that number by a safety margin.3- Next use the chart to pick the percentage account equity at risk that will keep you under the drawdown level YOU have chosen.

Low Risk Trading Strategy (from Van Tharp)A Low Risk trading strategy is a strategy with a long-term positive expectancy that's traded at a equity percentage risk level to allow for the worst possible occurrence in the short term without the Risk of Ruin drawdown so that you are able to realize the long-term positive expectancy / profits from your strategy.

On the recap vid I said the near term direction of the S&P was a mixed bag of dicks. Now that my vol is showing up on the cash index, paper sold the cash 3/9, 3/10, 3/12 but not the futures. NYSE sentiment while negative today is really weak. Values of +/- 20K and greater indicates a healthy move up or down. We're currently at -2,600. There is still tons of time left today but this move down is not at all indicative of a giant trend reversal, just small time selling. Paper's still bullish.

"Politicians always try to avoid their last big mistake—which was clearly the 1930s. So every time there’s a contraction in the economy, they’ll overstimulate the economy, including printing too much money. The result will be a rising roller coaster of inflation, with each high and low being higher than the preceding one.”

Topics:Volume: Don't be a dumbass look at the bigger pictureS&P: Mixed signals across cash and futures, bullish until demand drops offEuro: Bullish, ZeroHedge finally agrees 3 weeks late.Crude: Bearish, not time for 84 yetTwitter: Gave you the jump on institutional buying this pm, while ZeroHedge blamed computers 20 min after we told you. Still no clue how they make money, they're as accurate as cnbc.

I say adult because we'll use some logic and common fn sense vs little kiddies who are still afraid of the dark.Below is a pic of the weekly S&P volume. The area between the magenta lines is roughly when greenspan cut interest rates and we had a credit bubble. When you have credit bubbles you also have asset bubbles, like the stock market. The horizontal is last weeks volume. Note that it is roughly the same as it was during the peak of the credit bubble.For the sake of humanity, please hit those with bats who say we are running out of volume and no one is trading the markets anymore aside from robots and computers. They are clearly full of bs.

With ZH putting the lid on frivolous market manipulation posts, lets have a look at sentiment the past few days:Green is bull, magenta bear. Greater than 20K in the cash market at the cash close is a healthy strong day. When the pit and djia futures conflict with the cash mkt, we get mixed range bound days. Cash market defines your bias, S&P pit and djia futures help you determine if everyone else is on board.

top looks at sentiment of the cash mkt, red line is S&P futuresmiddle is S&P pit sentiment, red line is S&P futuresbottom is dow futures sentiment, red line is dow futures.*I dont plot the red lines, they're on here for comparison purposes of index movement vs sentiment only

green is bullish, magenta is bearish. If you're green you have a bullish bias, ie you long every pull back. If its magenta you short every rally.

note how the S&P pit was bullish the majority of the cash open, made a weak attempt at getting bearish then went bullish again after noon est.

cash was increasing in bullishness just after the pit went bull. dow futures lagged everyone but were still bullish ahead of the rally.

Then we had size come thru in the futures starting at 13:45 est, well after sentiment favored going long.

These sentiment indicators measure bulls vs bears in real time based on what is actually happening across the futures and the cash. They are not predictive, they are not designed to be predictive. They are mirror images of reality so that your bias is always on the right side of the market and what is actually happening. Technical analysis doesn't work. Thankfully, this isn't based off of anything technical.

Long story short: ZH is mad again that an Evil Machine buys low when selling pressure subsides and sells into strength for a profit like a profitable human does! Oh the HORROR!

I don't even trade the market they're talking about but lets be rational for 2 fn seconds:

Now for the juicy stuff...For months now i have been watching a specificalgorithm push our markets around with great ease. It looks like this algo isgiving the SPY a little push through support and resistance levels with massivesize executed in seconds. Sometimes the push is tens of thousands of shares, thesize all depends on the natural volume around the level which the SPY is tradingat the time it may need a "Jump". For instance if the market is oversold on a 1min time frame and is trying to break higher off lows but just cant get theparty going on its own, the algo will come in and take offers until day traders,scalpers, swing traders jump in and chase the market higher. Once the price gets"jumped" the algo just sits and waits till natural buyers and sellers are fewand far between and it either dumps or takes in more. Usually the program willreset itself after a trade, then will wait till it senses low volume once again.

For some concrete evidence of this action i have done a quickillustration, which includes Time & Sales which only display prints on theexchange the algorithm does business on. This exchange is used because of itsvery nice rebate structure, and it allows the algo to exploit the SOES, meaningit cannot trade in blocks larger than 10000 shares per order. So what does itdo, it takes blocks almost 10,000 shares multiple times a second, this priceaction causes the market to lift violently. This is not small money, remembersmall money follows big money.

The algo in question starts buying at110.04 with one block of 9999 shares, followed by 60k more shares all bought inunder two minutes. You can see from the chart how the SPY reacted, it violentlymoved higher all the way up to 110.55, where the algo dumped just about all ofthe shares, you can see the prints in the "dump" prints window, again onlyshowing the print from the exchange the algo does business on. The algo did itsjob, the cash market snapped back, the components again caught a bid and movedhigher through resistance. I.E. they look alive and well... Natural buyers camein above the 110.55 level chasing the market up another 50 cents or so beforethey left and the SPY fell again because the volume was not there to support themassive run up which took place over 15 minutes. As you can see the algo worksin two capacities, it manipulates the market to the upside along with keepingS&P500 components trading in a liquid orderly "non flat" fashion.

Theses geniuses even show a chart of how smart the Evil Machine is (click this Gem to make it larger):

1: Green circle around the volume? that's your key into selling pressure subsiding on that move down. That means sellers are done adding supply to the market and declining prices are DONE declining. See how they say "Natural buyers very thin", it's SELLERS that are thin. You know this because the DECLINE IN PRICE HAS STOPPED. It only stops if sellers stop adding supply greater than existing demand OR incoming demand forces price to stop declining because it exceeds the sellers supply.

1A: There is no fucking such thing as a "natural buyer". Algo or Human, all the supply/demand coming in to a mkt still counts kid-o, regardless of who/what initiated it.

2: No shit you buy here, in fact look at everyone else who did in their time and sales. See all the green at offer BEFORE the Evil Machine came in? People buying bc shits cheap and selling has subsided.

3: Remember how you profit when buy low? That's right, you HIT THE BID and sell it back to all the suckers now buying at already marked up prices. And they did, look at the red in the next time and sales besides what they have circled. People and the Evil machine hitting the bid to book profits OH THE HORROR.

View the complete post on how disturbed they are that they don't understand these concepts here

Buy low sell high is far from a new concept. Here is some recommended reading so you don't blame your trading ineptitude on computers. I will not waste your time w BS links and fkd up conjectured theories that have zero relevance to making money to justify my losses.

Check out this dude using ninjatrader's market replay posing as if he was making real trades to sell his shit.

He recorded the session, then REPLAYED it on the simulator and took trades to make it look like it was real, however he already knew the direction of the market.

I'd like to see his argument against this. Too bad for him he has time and sales up and it doesn't even move. In real life time and sales flies on the minis. Uh oh NT doesn't record time and sales. SCAMOLAAAAAAAA

Here's a look at sentiment on friday and again today. Note the extreme bearishness in the futures vs the cash today. Compare that to the bullishness from friday in both markets (Green in both, also NYSE sentiment was 20K vs todays's 6K). Friday the pit sentiment dropped off as traders took profits into rising prices, selling high.

Although sentiment increased in the pit this PM, it dropped sharply into the close just after the NYSE sentiment began to decline.

Zerohedge is at it again with its "market up because of robots" again! The stupidity never ceases to amaze me! Why they can't understand that markets can move with less than average volume is way beyond me.

Luckily BIDHITTER followers are smart and realize that the laws of supply and demand still exist regardless of how many people show up to play. Furthermore broad market (IE GLOBAL) sediment was BULLISH well before the cash mkt opened. Why justify today's move on robots when you clearly have ZERO clue what you are talking about?

But, having waxed poetic on our greatness and accomplishments, it falls to us to admit that there is a Dark Side(tm) to employing a non-professional (read: unpaid) and skeleton crew. We miss quite a lot. (Right, like truthful statements) Our tips@zh inbox sees about 200-300 emails per day, of which perhaps 15% are penis enlargement advertisements and 25% represent actionable, interesting material. Yesterday between 12:00am and 11:59pm we processed more than 1700 comments. No, that's not a typo. We are hosting over 225,000 comments in total today.

As you will quickly see, it is literally impossible fora newsroom as sparse as ours to cover such a beat. We miss quite a lot ofinteresting stories. Many reader tips are, if not ignored, simply lost in thestatic. More significantly, Zero Hedge employs no "ManagingEditor."(We know, it shows)

Unfortunately, Zero Hedge, which was but a small online carve-out lost in a salty sea of Blogger.com foam only 10 months ago,has reached a point where the weight of subject matter we regularly manage requires a bit more care and attention than we have been able to give before now.(No kidding.)

It is for this reason that Zero Hedge has retained our first Ombuds(wo)man.

It would not be waterboarding the matter in the least to suggest that Zero Hedge is a literal lightening rod for criticism. Nor would it be out of place to point out that, where it is dismissed,Zero Hedge tends to fall into the"extraordinary claims require extraordinary evidence" bucket. True, we have hit a number of very thin nails on the head (national security exceptions to financial disclosures and AIG balance sheets come to mind). But, to the extent "extraordinary evidence" is the side of that balance sheet that readers (or non-reader critics) find lacking, we are underperforming in the marketplace. This will not do.(The first step to recovery is admitting you have a problem. This is good)

The sorts of small details that are likely to escape a writing staff with no formal editors in-house, quite obviously, escape us- as we have no formal editors in-house. Moreover, despite the fact that we maintain a dedicated abuse / legal team (with a dedicated inbox that we monitor pretty closely), most Zero Hedge criticism seems to find root inthe pages of other blogs, whose authors do not appear to regard comment from us as a pre-requisite to unfettered publication. Often, we learn of some "cutting" rebuke somewhere in the blogosphere (or even the mainstream media) days or even weeks after its publication. In fact, it seems to be the rule that issues of citation, clerical or even significant factual errors on Zero Hedge play out in public before we ever hear of them. This month (as you may have noticed) has been no exception. (Oh the irony. They can follow BIDHITTER with an RSS reader and can also follow us off a cliff on twitter. They can also type in http://bidhitter.blogspot.com/ into a fancy web browser and in less than a min they will wind up here. Cooler yet, they can load us up on their MP3 player! It's the wave of the future.)

The global macro theme doesn't have much to do with the domestic equity market sell off. We've been pricing in future growth for a year. Apparently it's here and we've recovered fundamentally. If that's true, we should sell off as our future pricing in of growth has been fully realized. Markets are forward looking discounting mechanisms, not real time. Those appearing on TV who "don't understand the reason for the sell off given the strong fundamentals" are simply foreshadowing their eventual demise.

There has been enormous interest in sponsors, newsletters and detailed explanations of market conditions. It seems as though there is still some intellect left as in others who also laugh at Zero hedge. Here is a preview of things to come.